Written by Legislator Delia DeRiggi-Whitton Friday, 20 April 2012 00:00
This Monday I witnessed the legislature’s Rules Committee session, during which those legislators who support County Executive Mangano approved a contract between Nassau County and the investment bank of Morgan Stanley.
The deal they voted for would have Morgan Stanley financially evaluate our county’s sewer system (put a price on it), and then would have that same bank go out and broker a deal for someone to operate the system based on that information.
As far as the idea of sewer privatization goes, based on what little information I am able to glean from testimony given by the county executive’s office Monday, along with research my legislative caucus has assembled on the issue, you would think this deal has not been put together in a way that is fair and safe for taxpayers.
As it stands, Morgan Stanley is being paid to “explore” privatization, in the words of a deputy county executive at the session. They will be paid hundreds of thousands to do this.
But, after their “exploration,” if they actually create a deal for Nassau, the pay day is much bigger – earning Morgan a minimum of $5 million, or 0.75 percent of the whole transaction, whichever is greater.
First, it would seem the investment bank has an obvious incentive to instigate a privatization deal. While the fees they are charging for “exploring” a deal are large, that final payout is many times larger.
Second, you would think an independent party should evaluate the right numbers for the price of the sewer system. To have the same bank put a price on the system while seeking a buyer for the system seems to hand too much power over to that bank and their potential buyer.
The bank stands to make millions by securing a deal. Therefore, they have very little reason to get us the best price, especially when they are guaranteed a minimum of $5 million. They seem to have an incentive, in fact, to push for whatever deal works best for a buyer.
I understand that the county executive faces many financial challenges and he is desperate for possible solutions. But, every time he throws some plan at the legislature for approval, the plans always seem hasty and not in the best long-term interest of the county. In this case, the deal seems to have been made deliberately in the best interest of Morgan Stanley.
If something is worth doing, it is worth doing right. Nassau County residents deserve better than this from their government.